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A Cost-Effectiveness Framework for Profiling the Value of Hospital Care

Author

Listed:
  • Justin W. Timbie

    (Department of Health Care Policy, Harvard Medical School, Cambridge, Massachusetts, justinti@med.umich.edu)

  • Joseph P. Newhouse

    (Department of Health Care Policy, Harvard Medical School, Cambridge, Massachusetts)

  • Meredith B. Rosenthal

    (Department of Health Policy and Management, Harvard School of Public Health, Cambridge, Massachusetts)

  • Sharon-Lise T. Normand

    (Department of Health Care Policy, Harvard Medical School, Cambridge, Massachusetts, Department of Biostatistics, Harvard School of Public Health, Cambridge, Massachusetts)

Abstract

Provider profiling and performance-based incentive programs have expanded in recent years but need a theoretical framework for measuring and comparing the ``value'' of clinical care across medical providers. Cost-effectiveness analysis provides such a framework but has rarely been used outside of the treatment choice context. The authors present a profiling framework based on cost-effectiveness methods and illustrate their approach using data on in-hospital survival and the cost of care for a heart attack from a sample of Massachusetts hospitals during fiscal year 2003. They model each outcome using hierarchical models that allow performance to vary across hospitals as a function of a latent quality effect and an effect of case mix. They also estimate incremental outcomes by conditioning on each hospital's pair of random effects, using indirect standardization to estimate ``expected'' outcomes, and then taking their difference. Incremental cost and effectiveness outcomes are combined using incremental net monetary benefits. Using cost-effectiveness methods to profile hospital ``value'' permits the comparison of the benefit of a service relative to the cost using existing societal weights.

Suggested Citation

  • Justin W. Timbie & Joseph P. Newhouse & Meredith B. Rosenthal & Sharon-Lise T. Normand, 2008. "A Cost-Effectiveness Framework for Profiling the Value of Hospital Care," Medical Decision Making, , vol. 28(3), pages 419-434, May.
  • Handle: RePEc:sae:medema:v:28:y:2008:i:3:p:419-434
    DOI: 10.1177/0272989X07312476
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    References listed on IDEAS

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    1. Viscusi, W Kip & Aldy, Joseph E, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
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    Cited by:

    1. Häkkinen, Unto & Rosenqvist, Gunnar & Peltola, Mikko & Kapiainen, Satu & Rättö, Hanna & Cots, Francesc & Geissler, Alexander & Or, Zeynep & Serdén, Lisbeth & Sund, Reijo, 2014. "Quality, cost, and their trade-off in treating AMI and stroke patients in European hospitals," Health Policy, Elsevier, vol. 117(1), pages 15-27.
    2. Lobo, Mariana F & Azzone, Vanessa & Lopes, Fernando & Freitas, Alberto & Costa-Pereira, Altamiro & Normand, Sharon-Lise & Teixeira-Pinto, Armando, 2020. "Understanding the large heterogeneity in hospital readmissions and mortality for acute myocardial infarction," Health Policy, Elsevier, vol. 124(7), pages 684-694.

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